QUESTION 3

1. Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

   Sales are budgeted at $410,000 for November, $420,000 for December, and $400,000 for January.

   Collections are expected to be 65% in the month of sale and 35% in the month following the sale.

   The cost of goods sold is 60% of sales.

   The company desires an ending merchandise inventory equal to 45% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase.

   The November beginning balance in the accounts receivable account is $76,000.

   The November beginning balance in the accounts payable account is $263,000.

   Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

   	November	December
   Sales
   Schedule of Expected Cash Collections
   Accounts Receivable
   November Sales
   December sales
   Total cash collections	$342,500	$416,500

   Merchandise Purchases Budget	November	December
   Cost of goods sold
   Total needs	498,000	360,000
   Required purchases	$387,300	$246,600

QUESTION 4

1. Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:

   Sales are budgeted at $304,000 for November, $324,000 for December, and $224,000 for January.

   Collections are expected to be 60% in the month of sale and 40% in the month following the sale.

   The cost of goods sold is 75% of sales.

2. The company desires to have an ending merchandise inventory at the end of each month equal to 90% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.

   Other monthly expenses to be paid in cash are $22,500.

   Monthly depreciation is $28,000.

   Ignore taxes.

   Balance Sheet October 31
   Assets
   Cash	$	33,500
   Accounts receivable		84,000
   Merchandise inventory		288,900
   Property, plant and equipment, net of $624,000 accumulated depreciation		919,000
   Total assets	$	1,325,400
   Liabilities and Stockholders' Equity
   Accounts payable	$	253,000
   Common stock		754,000
   Retained earnings		318,400
   Total liabilities and stockholders' equity	$	1,325,400

   Accounts payable at the end of December would be:

   		$243,000
   		$175,500
   		$24,300
   		$151,200

QUESTION 5

1. Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:

   Sales are budgeted at $304,000 for November, $324,000 for December, and $224,000 for January.

   Collections are expected to be 60% in the month of sale and 40% in the month following the sale.

   The cost of goods sold is 75% of sales.

   The company desires to have an ending merchandise inventory at the end of each month equal to 90% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.

   Other monthly expenses to be paid in cash are $22,500.

   Monthly depreciation is $28,000.

   Ignore taxes.

   Balance Sheet October 31
   Assets
   Cash	$	33,500
   Accounts receivable		84,000
   Merchandise inventory		205,200
   Property, plant and equipment, net of $624,000 accumulated depreciation		919,000
   Total assets	$	1,241,700
   Liabilities and Stockholders' Equity
   Accounts payable	$	253,000
   Common stock		754,000
   Retained earnings		234,700
   Total liabilities and stockholders' equity	$	1,241,700

   The difference between cash receipts and cash disbursements for December would be:

   		$27,375
   		$64,375
   		$18,500
   		52,000